Is XRP’s Security Status Ensured by CLARITY Act Section 105?
May 14, 2026
The focus has returned to XRP’s security status in light of the CLARITY Act Section 105, which is under scrutiny before Senate amendments and markup. Supporters are pointing to Section 105 of the latest CLARITY Act draft, suggesting it could bolster the legal position of XRP secondary market sales. The debate intensified after XRP-centric accounts highlighted pages 110 to 112 of the draft, arguing that Section 105 incorporates language aligned with previous court decisions. The contention is that if a court has already determined that a digital asset transaction was not a security before the bill becomes law, that transaction should not later be reclassified as a security under the same framework.
This line of thinking is directly linked to Judge Analisa Torres’ 2023 ruling, which concluded that XRP secondary market sales were not securities transactions. Proponents of XRP believe that Section 105 has the potential to establish a federal legal shield around that aspect of the Ripple case if the bill is passed in its present form. However, it’s crucial to note that this claim is associated with draft legislation, not legally enacted statutes. The CLARITY Act still needs to navigate through committee processes, withstand amendments, proceed through the Senate, and potentially reconcile with other legislation before becoming law.
Section 105 is grabbing attention due to its introduction of a decentralization test and the inclusion of language surrounding “network tokens.” XRP supporters argue that this classification could suit XRP because the XRP Ledger operates independently of Ripple and is utilized for payments, settlement, and utility-based transactions. The essence of their argument is that XRP’s value is derived from network usage rather than direct claims on Ripple’s profits. Additionally, they highlight that the XRP Ledger remains functional even in the absence of direct involvement from Ripple, bolstering the case for treating XRP differently from a company-issued security.
Critics may present challenges to this interpretation, noting that the draft language would necessitate legal interpretation, and regulators could still scrutinize specific transactions, issuer conduct, or market activities based on the final bill’s wording. For XRP holders, the primary concern revolves around whether the CLARITY Act can mitigate the risk of impending SEC action regarding secondary market trading. Supporters assert that Section 105 could potentially deter future administrations or SEC chairs from revisiting the same security classification dispute.
Ripple’s leadership, including CEO Brad Garlinghouse and Chief Legal Officer Stuart Alderoty, have expressed support for the CLARITY Act’s progress and advocated for regulatory clarity in the crypto space. They underscore the importance of establishing rules and protections akin to other asset classes for millions of Americans participating in the crypto markets. Ripple’s endorsement of the bill aligns with its ongoing involvement in broader U.S. digital asset regulatory discussions. Clarity surrounding token categorization, exchange oversight, and market structure could impact multiple major tokens, including XRP.
The upcoming Senate Banking Committee markup, particularly amidst Senator Elizabeth Warren’s introduction of over 40 amendments to the CLARITY Act, adds a layer of uncertainty to the legislative process. Warren’s proposed amendments touch upon issues like investor protection, national security concerns, financial system stability, and potential restrictions on crypto firms’ access to Federal Reserve accounts. These developments suggest that the forthcoming markup session could serve as a litmus test for the ongoing support for the CLARITY Act in its current form.
